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AZ Regulator Accused of Tampering with Southwest Merger

AZ Regulator Accused of Tampering with Southwest Merger

The bloody battle over the right to merge with Southwest Gas Corp. has recently claimed another victim: Arizona Corporation Commissioner (ACC) Jim Irvin. Federal and state authorities are investigating allegations that the state regulator illegally influenced Southwest Gas to go with Oneok Inc. as a merger partner instead of rival suitor Southern Union Co.

The U.S. Attorney's Office, the FBI and the Maricopa County (AZ) Attorney's Office are probing the allegations that were brought by Southern Union "in concert with certain individuals within the Arizona Corporation Commission," a knowledgeable source told NGI.

While the source confirmed a criminal investigation was ongoing, he and others refused to disclose further details. "[These three offices] are looking into a matter that involves the Arizona Corporation Commission. I will make no other comment," said Bill FitzGerald, a spokesman for the Maricopa County Attorney's Office. "It would be totally inappropriate for us to [comment] at this point," said a spokeswoman for the U.S. Attorney's Office in Phoenix.

The investigation sprang out of a civil action filed in July by Southern Union and certain unnamed members of the ACC, accusing Irvin of improperly using his position as then-chairman of the Arizona commission to nudge Southwest Gas toward Oneok, a Tulsa, OK-based LDC. The lawsuit calls for $750 million in damages.

Both Oneok and Southern Union of Austin, TX, have been in a fierce bidding war to acquire Southwest Gas. Last December, Southwest - which serves gas users in parts of Arizona, Nevada and California - selected Oneok as its buyer, even though Southern Union had bid higher for the company ($32 per share vs. $30 per share from Oneok). Southwest's board of directors at the time expressed doubts about whether Southern Union could finance the deal and whether it could obtain the needed regulatory okays.

The lawsuit contends Irvin got Southwest Gas' board to accept Oneok's merger proposal by strongly suggesting that a Southern Union deal would run into problems at the regulatory level. "The facts of this case will expose the absurdity of this claim," the Arizona regulator responded in a prepared statement.

Irvin vehemently disavowed all charges. "I categorically deny each and every civil and criminal allegation, and am confident my actions were not only within the confines of state and federal law, but were taken on behalf of the interests of the Arizona consumers I represent."

Irvin said the lawsuit was politically and financially motivated. ".It is clear to me that Southern has been working in conjunction with individuals within the Commission to apply the political pressure necessary in thwarting consideration of the Southwest-Oneok merger. Again, this attack on my reputation from entities outside of and within this Commission will not go unchallenged."

Some of the allegations were made in affidavits provided by James Fisher, an executive assistant for a former commissioner, according to Irvin. Fisher "has a history of wrongdoing at the Commission.....[His] prior actions cast serious doubt on his credibility as a witness for Southern," he said.

The allegations are an act of "political gamesmanship," which Irvin says "is no stranger to this commission." In the past couple of months, Irvin was forced to step down as chairman after the two then-Commissioners Tony West and Carl J. Kunasek threatened to vote him out; Commissioner West was removed from office by the Arizona Supreme Court for holding a valid securities license; and now Irvin finds himself the target of a civil lawsuit and criminal investigation. Even the most loyal of staff members characterize the commission as being in a state of "chaos."

As to the status of the Southwest Gas-Oneok merger, the Arizona commission plans to take it up again in early September. It had intended to address the transaction at a hearing in July, but that was postponed when news of the criminal investigation broke. The proposed marriage has been approved by Nevada regulators, but it still awaits action in California.

John Norris, Susan Parker

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ISSN © 2577-9877 | ISSN © 1532-1266
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